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TDS on re-imbursement expenses -Urgent

Smita (employee) (64 Points)

15 April 2010

Hi All ,

Need calrification on follwoing point.

Nature:

Comapny is planning the recrational activity to employees.

Recrational activity means , club is booked ,where food arrangements , sport acticities , conferance hall facility is provided .

The amount of expenses will exceed Rs.50,000/-.

Issue :

Issue is entire expenses will be born by detarmental head on the day of activity.

Vendor will give one bill in name of Employee only.

Company will reimburse the expenses to departmental head latter.

Question:

1.Whether this recreational activity atttracts TDS?

2. Whether company is laible to pay TDS , as entire bill will be in name of employee.

Will be great help , if support is provided urgently.

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8 Replies

Amit Ingale (Student CA Final) (1454 Points)
Replied 15 April 2010

Yes !!!

The company is liable for TDS, even though, the bill will in the name of employess,

as ultimately , your employer is gonna reimburse it .

so it means expenses shall be borned by the employer only.

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Smita (employee) (64 Points)
Replied 15 April 2010

Thank you for revert amit

But What about

Circular No.715 dt.8-8-1995 which states that -

any sum paid”, if the bill contains reimbursement of expenses also, the TDS is applicable on the reimbursements also.

However, if there are separate bills for contract payments and reimbursement of expenses, then, TDS is not required to be made on reimbursement of expenditure.

As in intsance case separate bill is in name of employee and not in name of company.

CA CS CIMA Prakash Somani (Landmark Group) (23502 Points)
Replied 15 April 2010

yes, you can not evade tax just by making 2 transection of the one. it is on the face that company is ultimately liablefor the expenses. thus TDS liability would be on company only

Smita (employee) (64 Points)
Replied 15 April 2010

Thank you for help prakash.

Need one more clarification on the same.

1. Whether TDS is attracted for such recreational activity which includes lunch arrangements , conference hall facility , outsport facilities like water world etc. Bill amount will be above 50000/-If yes whether under 194 c or 194j

2 How payments arrangements can be made in such cases for TDS as well as reimbursement?

Please guide on this

CA.GAURAV SACHWANI (JOB) (161 Points)
Replied 15 April 2010

it is a contract so 194c will be attaracted

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Amir (Learner) (4016 Points)
Replied 15 April 2010

Dear Mam,

I agree with other members, TDS should be deducted u/s 194C.

Since it is a single contract for making the entire arrangement for the event & the fact that bill is in the name of the employee can't be taken as a measure to escape from TDS provision.

The circular which you pointed out cannot be applied in the present case

Further mam, I would say try & get the invoice in the name of the employer cos then it won't create any problem in claiming the expenses otherwise Auditors & IT Department can simply say that since the bill is not in the name of the employer these expenses are not related to business & u will not be able to prove it in the absence of TDS deduction.

Smita (employee) (64 Points)
Replied 15 April 2010

Thank you all so much for helping to get the clarity...

1 Like

Ravindra Manek (Chartered Accountant) (74 Points)
Replied 15 April 2010

Agree with all. Further what has been mentioned in Circular No.715 dt.8-8-1995 is in the context of clearing & forwarding agent wherein total payment made to agents also include reimbursement of expenditure incurred by him.